Taiwan says hopes to cut trade surplus after US currency move

[TAIPEI] Taiwan hopes to cut its trade surplus with the United States to address US concerns about the Taiwan dollar's exchange rate, the island's central bank said on Thursday.

The comments come after the US Treasury on Wednesday added Taiwan to a "monitoring list" of countries whose currency practices have caused concern, the first time the island has appeared on the list since 2017.

Speaking at Parliament, Taiwan central bank deputy governor Yen Tzung-ta said maintaining the stability of the foreign exchange rate was their obligation and priority, and that the US decision was based on information for last year rather than the current exchange rate.

The US Treasury's decision is a reflection of the international economic situation and the island's trade surplus with the United States, he added.

"We hope to cut the trade surplus with the United States," Mr Yen said. "This is the long-term solution."

Taiwan's 2019 trade surplus with the United States hit US$23 billion. The economy has benefitted this year from global demand for Taiwan's high-tech goods from people forced to work and study at home during the Covid-19 pandemic.

Taiwan's central bank has continued to stress to the US Treasury that the benchmarks they use are disputed, Mr Yen added.

Taiwan, however, will "do its best" to avoid being named a currency manipulator next year, he said.

Countries must at least have a US$20 billion-plus bilateral trade surplus with the United States, foreign currency intervention exceeding 2 per cent of gross domestic product (GDP) and a global current account surplus exceeding 2 per cent of GDP to be labelled a manipulator, according to US Treasury criteria.

The Taiwan dollar has strengthened 7 per cent against the US dollar this year, and jumped more than 1 per cent on Thursday morning.

Taiwan was last formally labelled a currency manipulator by the United States in December 1992, but was later put on the US Treasury monitoring list in 2016 and 2017.

The issue is particularly sensitive for Taiwan as the government is keen to keep in Washington's good books, with the United States being the Chinese-claimed island's most important international backer and arms seller.

REUTERS